One thing all market mavens rely on when looking for trends and market direction is history, because things often play out in similar patterns around specific events. This year is no different as one of the biggest events for the country is coming to a conclusion in three months and it will shape how investors positions themselves.
In a new research note, Sean Darby, the outstanding equity strategist at Jefferies, goes to the history books and find three areas that should do well leading up to the election. While he acknowledges that the so-called Misery Index, which combines inflation and unemployment, should favor the Democrats, the income equality and overall displeasure with Washington, D.C., are very prevalent.
The three investments ideas that historically have performed well prior to an election are buying the volatility index (VIX), betting on a stronger dollar and owning financials, which have underperformed this year. We found four large cap stocks to consider buying now.
Bank of America
The company posted very solid second-quarter results, and the overall trend for the company looks better. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers, online and mobile banking platform.
The company is one of the larger lenders to the oil and gas industry, and it told analysts earlier this year that it had set aside more money for coverage of loans to the industry that may go bad. Overall credit quality remained strong, while consumer portfolios continued to improve and commercial portfolios remained stable with energy improving. The equity and debt trading at the firm helped boost the second-quarter results, while low interest rates still remain a drag.
Bank of America investors are paid a small 1.4% dividend. The Wall Street consensus price target is $17.07. The shares closed Wednesday at $14.48.
This top bank stock is still down over 20% from highs that were posted last summer, but the bank also came in with very solid second-quarter results. Citigroup Inc. (NYSE: C) has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. It provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.
Trading at a very cheap 9.4 times estimated 2016 earnings, this stock looks very reasonable in what is becoming a pricey stock market. A continuing stock buyback program at the bank is a positive. The company’s institutional clients group appeared to be holding its ground last quarter. While investment banking revenue was down in an unsure macro environment, trading revenue remained strong, up 2% from last year.
Citigroup investors are paid a 1.46% dividend. The Wall Street consensus price objective is posted at $54.41. Shares closed most recently at $43.89.